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IMF Managing Director Christine Lagarde to Propose Approval in Principle of New Stand-By Arrangement for Greece

June 15, 2017

Approval in Principle (AIP) would allow the IMF to be supportive of the progress made on policies, while release of resources under the IMF arrangement would be conditional upon Greece’s European creditors providing commitments for debt relief sufficient to secure debt sustainability.

AIP supports the IMF’s long-held principle that any new program with Greece should be predicated on the “two legs” of policy reforms combined with debt relief.

The IMF’s Executive Board will need to determine the specific modalities of AIP.

Ms. Christine Lagarde, Managing Director of the International Monetary Fund
(IMF), issued the following statement on Greece in Luxembourg today:

“I would like to announce my intention to propose to the IMF’s Executive
Board the approval in principle (AIP) of a new IMF Stand-By Arrangement for
Greece.

“We have recently seen significant progress by the Greek government on
policy reforms, with a staff-level agreement followed by supportive
legislation from the Greek Parliament. We have also seen progress on debt
relief, although further discussions are needed on the scope and type of
measures to be provided by Greece’s European creditors.

“AIP is a procedure which the IMF has relied upon in the past where there
has been agreement on the policies that would underlie an IMF-supported
program, but where full agreement between the member and its creditors has
not yet been reached on new financing or debt relief. In the case of
Greece, AIP would allow the IMF to be supportive of the progress made on
policies, while release of resources under the IMF arrangement would be
conditional upon Greece’s European creditors providing commitments for debt
relief sufficient to secure debt sustainability.

“It is also important to note that AIP supports the IMF’s long-held
principle that any new program with Greece should be predicated on the “two
legs” of policy reforms combined with debt relief. With AIP, the release of
IMF funds would be contingent on policy implementation and receipt of debt
relief assurances so that debt can be deemed sustainable. Furthermore,
assessment of debt sustainability would be guided solely by the IMF’s own
debt sustainability analysis. It is expected that AIP would involve a
precautionary Stand-By Arrangement for a loan amount well below the IMF’s
exceptional access threshold. The IMF’s Executive Board will need to
determine the specific modalities of AIP.

“I strongly believe that use of the AIP procedure will enable the IMF to
leverage both reform and debt relief. It will give confidence to creditors
to disburse to Greece under the ESM program in July—thus reducing a
potentially serious stress on the Greek economy—and it will give confidence
to investors on the prospects for the Greek economy to grow and its people
to prosper. I hope that the discussion over specific debt relief measures
can soon be brought to conclusion.”